Views Diverge about State of Retail Market and Priorities for Brick and Mortar Locations

Given the widespread number of store closures over the past five years and the rapid ascent of online shopping it comes as somewhat of a surprise that mall and shopping center owners and their retail tenants remain at odds over the role of brick and mortar stores and their role in retailers’ growth strategies.

That’s the conclusion of a new pair of retail surveys issued by FTI COnsulting and BDO. What’s not surprising is that a large majority of store owners believe opening new stores remains key to retailers’ growth, while just more than half of retailers surveyed think so.

Just 61% of retailers agree that new stores are critical to their sales growth compared to as many as 93% of landlords think new stores are the way to growth, according to FTI Consulting’s latest Retail Real Estate Beat.

In addition, responses to BDO’s inaugural 2017 Retail CxO Holiday Survey Report indicate that a divergence of views between retailers and shoppers as well. According to Natalie Kotlyar, partner at BDO USA, 50% of retailer execs continue to identify big box stores as their top competition, considering it a much higher threat than online shopping.

“This year’s holiday sales may reveal a hard truth,” Kotlyar said, adding that the disconnect between retailers’ expectations and consumers’ actual preferences around online shopping, shipping and disposable income suggests that consumers are evolving faster than retailers are adapting.

Christa Hart, a senior managing director in the retail and consumer products practice at FTI Consulting, also said their research suggests that many retailers remain in denial about deep and pervasive shifts in consumer trends affecting the state of the industry.

Hart noted that one of the greatest disconnects between landlords and retailers is the concern over evolving consumer demographics and preferences: 70% of landlords cite this concern, compared to only 40% of retailers. Further, 60% of landlords think that retail customers are shopping in stores less often, while only 37% of retailers think that.

Not surprisingly, landlords are far more concerned than retailers about the shift to online shopping and changing consumer preferences (80% of landlords, compared to 57% of retailers). Landlords’ concerns about online retailing may, in fact, not be misplaced, said Cynthia Nelson, a senior managing director in the real estate and infrastructure industry group at FTI.

“This concern is understandable since landlords’ real estate assets can’t be modified to succeed in the digital era as readily as can retailers’ ability to become omnichannel merchants,” Nelson said.

Perhaps the most important finding to come out of the FTI survey is the mandate for landlords and their retail tenants to develop a better understanding of each other’s needs and how the evolving nature of retail will affect both sides of the equation, Nelson said.

“While it may not come as a total surprise that landlords place a greater value on the physical location of the store than retailers do, these variations in perceptions present a real opportunity for landlords to work more closely with their retail tenants to explore how they can support their growth plans,” Nelson said.

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